The government is considering multiple options to seek relaxations from the International Monetary Fund (IMF) on key fiscal and macroeconomic targets ahead of the 2026–27 budget. The move is aimed at reviving economic activity and creating space for growth-oriented policies.
Policymakers believe that strict conditions under the IMF’s Extended Fund Facility have constrained growth by increasing taxes and raising electricity and gas tariffs. Growing criticism of these measures has prompted renewed efforts to negotiate more flexible terms.
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Officials are exploring the possibility of relaxing targets related to the primary balance and provincial budget surpluses in the next fiscal year. The government may also request permission to set a relatively higher fiscal deficit to support development and investment.
After completing two years in office, the government is now focusing on accelerating growth in the third year of its tenure. Authorities are targeting economic growth of 5 to 6 percent by encouraging investment, reducing unemployment and easing pressure on businesses.
Prime Minister Shehbaz Sharif has instructed the Ministry of Finance and the Federal Board of Revenue to work closely with the business community. The aim is to attract both domestic and foreign investment and address concerns over the widening trade deficit.
Export-led growth has been identified as the top priority, while efforts are also underway to boost overall investment through the Special Investment Facilitation Council. Policymakers are examining options to further reduce power tariffs to improve industrial competitiveness.
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The government is also seeking IMF approval to offer tax incentives, including a gradual reduction in the super tax for the manufacturing sector. Under the proposed industrial policy, the super tax would be reduced to 5 percent over four years and abolished in the fifth year if a primary surplus is achieved.
Additional proposals include raising income thresholds for super tax applicability and leveraging lower inflation to reduce the policy rate. The government is also considering setting lending targets for banks to improve credit flows to small and medium-sized enterprises.